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EUR / USD: After the ECB and the Fed decision _21/03/2016

Technical analysis and trading recommendations -

The probability that the Fed will postpone the tightening in US monetary policy at a later date, led to the weakening of the US dollar last week. Today, the US dollar recovery occurs. However, to talk about the reversal of the downtrend in the dollar talk is premature. Dollar correction is likely to be temporary.
The Fed last week left its key interest rate unchanged at 0.5%, however, lowered its forecasts for future rate hikes.

Now, the two planned to increase the key interest rate in 2016 to 0.875%. Earlier it was planned that the key interest rate will be increased to 1.375% by the end of 2016, up to 2.375% by the end of 2017 and to 3.25% by the end of 2018. By the end of 2017 rate will be 1.875%, and the end of 2018 - 3%.

Following the publication of the Fed's decision on rates EUR / USD pair consolidated in two days more than 200 points. Market participants have received from the Fed signals a tendency to a more loose monetary policy, rather than to its last meeting on 15-16 March.

All in all, from 10 March, when the ECB has expanded QE program in the Eurozone, the EUR / USD rose from the 1.1000 level on 315 points after the publication of the Fed decision.

What the ECB is seeking - namely, the maintenance of the growth of the euro area economy, the acceleration of inflation and a cheaper euro will not occur. All ECB's efforts are in vain. The EUR / USD rose again and is close to local maxima located at the levels of 1.1350, 1.1400, returning thus marks a year ago.
The ECB can not be unaware of this, and the ECB head Mario Draghi desperately defends its extra soft policy of the central bank.

It is significant that on Friday the ECB chief economist Peter Pret debunked the idea that the decline in interest rates is over, and the central bank has not yet exhausted its possibilities. This is somewhat contrary to the statement made to the President of the ECB Mario Draghi last week, saying that the central bank is not going to continue to cut interest rates, although it can occur if conditions change.

Thus, the conclusion is that the ECB does not depart from its policy of extra-soft, and on April 21 to its next regular meeting will be to resort to periodic verbal intervention to bring down the strength of the euro and the pair EUR / USD.

Monday, 21 Mar, 2016 / 2:08

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